The usual practice in a hiring process is that someone on the selection panel cannot also be a referee for any of the candidates. It is therefore unlikely that your Department Head can give you a letter of recommendation for the position. This actually puts you in a bit of a quandary, since it rules out at least one senior academic that would normally be one of your references, and possibly also other senior academics in your Department. In view of this, it would be reasonable for you to write to your Department Head and ask the following:
Can he write you a letter of recommendation in this case, or does that conflict with his selection responsibilities? (Note that you suspect it is probably the latter.)
Assuming it is the latter, would he have any objection if you note in your application that you are unable to get a reference from your Department Head (and perhaps also from other senior academics you work with) in order to maintain separation of referees from the selection panel, and you would like the panel to take into account that you are thereby forced to seek references from academics who work less closely with you (and therefore have a bit less knowledge of your work).
In practice ---and notwithstanding formal separation of referees and selection panelists--- the academics on the selection panel who work with you are likely to take into account their own observations of your work in addition to the information in your application. So even if you don't have your Department Head as a referee, he is likely to take account of his knowledge of your performance during the selection process. Consequently, you are not really at a disadvantage from being forced to seek references from people further removed from your work. Nevertheless, just in case there is someone on the panel who is not familiar with you, it may be useful to remind the panel that this is the reason you have not given references from your Department Head, etc.
